Metro Growth: The UK’s economic opportunity

The newly created City Growth Commission (CGC), led by ‘BRICS’ founder Jim O Neill and supported by leading international economists including Diane Coyle, Greg Clark and Bruce Katz, begins its independent inquiry into shaping city-led growth, with an open hearing at Manchester Town Hall on Tuesday 11th February 2014.

To coincide with the meeting the City Growth Commission today released its first report, Metro Growth: The UK’s economic opportunity which concluded that most large urban areas remain in fiscal deficit, with public expenditure exceeding tax take.

The report found that Greater Manchester has a shortfall of an estimated £4–5bn per year, equal to roughly £2,000 per person. Yet metros have little power to change this; over 90% of all tax is collected by central government.
Commenting on the evidence hearing, the Commission’s Chair Jim O’Neill said:

“Metros – city centres and their wider economic areas – are driving growth globally. The UK has the 7th largest economy in the world but we face huge international competition. The City Growth Commission will hear from a range of people within Greater Manchester – and other cities thereafter – about the mix of powers, incentives and responsibilities needed to compete in the global economy.”

Focussing on skills, infrastructure and devolution of fiscal and policy-making powers the Commission makes an early exploration into some of the factors currently limiting UK cities’ growth. The Commission’s first report found that:

Skills are consistently identified by businesses as a big barrier to growth. Whilst universities play an important role in developing skills and clustering talented people, graduate retention and attraction strategies are relatively unexplored aspect of economic development.

Although many UK cities are close in distance, weak infrastructure links between regions mean that potential economic relationships are under-developed. Despite the 22,000 commuters that cross the Pennines every day between the largest metros of Yorkshire and the North West, the economic relationships between Manchester and Leeds are less strong than might be expected for cities of their size.

There remain large differences between metros in qualifications. South Sussex Metro (Brighton, Hove, Worthing, Littlehampton and Shoreham – combined population of half a million residents) was found to have 23 residents who are university graduates for every 10 who have no qualifications. By contrast, the Potteries Metro is home to 22 residents with no qualifications for every 10 university graduates.

Planning and housing will need to be at the heart of many metros and regions strategies. They will need greater flexibility to plan where they develop and how they link to other cities and regions to maximise their growth potential, while protecting their exceptional countryside and heritage.

UK policy and strategy must shift. Rather than ‘rebalancing’ the economy between cities and regions, a successful UK economy is likely to involve a network of mutually reinforcing complementary and connected metro regions. A complementary system of cities would allow labour and capital to flow more efficiently, helping investors, businesses and households to manage risks and make the most of opportunities.

“It is increasingly clear that our centralised political economy is no longer fit for purpose. Unless we change our approach, we’ll be running to catch up with the long term costs of our ageing population. Metro Growth shows that UK cities will need to maximise their skills base and other assets if they are to drive up productivity and growth. Public service reform is a critical part of this.”

The City Growth Commission runs for only 12 months. Having launched in October 2013 with an open call for evidence, the Commission will seek to influence all political parties in the run up to the next General Election, and make the case for cities to take on new political powers.

The Commission launched in October 2013. The Commission’s final report will be published in autumn of 2014.

Funding for the City Growth Commission comes from the Core Cities group, London Councils, the Mayor of London, and the Local Government Association. New Economy and Joseph Rowntree Foundation are also research partners.